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Rupee Depreciation and Textile Industry

2.

 The recent rupee depreciation has enabled the Indian textile industry
to hold yarn prices and also increase yarn exports
 Though Indian industry demonstrates stronger backward
linkages, low labour costs have enabled countries like
Bangladesh, Pakistan and Vietnam to overtake India in terms of
capturing textile export markets
 With Chinese Yuan appreciating, Indian exports have become more
competitive. Indian textile export share is marginal (5% as compared
to China’s 30%)
 As a CEO of leading textile manufacturer, you are planning to go in for
capacity expansion. Capacity expansion necessitates funding and thus
you approach a consortium of banks. Prepare the detailed projections
convincing the bankers how the global economic trends portray well
for Indian textile exporters.
Caselet

3.

 The Indian textile industry is one of the major sectors of Indian
economy and contributes almost 14 per cent of India’s industrial
production, 4 per cent of National GDP and almost 17 per cent of
India's export earnings
 As per the annual report 2010-11 of Ministry of Textiles, the size
of Indian textile sector is reached up to USD 55 billion
 India has the potential to increase its textile and apparel share in
the world trade from the current level of 4.5 per cent to 8 per cent
and reach US$ 80 billion by 2020
 Exports of textile grew to USD 26.8 billion in FY 2010 from USD
17.6 billion in FY 2006. India’s textile trade is dominated by
exports with a CAGR of 6.3 per cent during the same period
Overview

4.

 According to the Confederation of Indian Textile
industry, the continuous rupee depreciation has been profitable for
many textile and apparel exporters in the country
 Textile buyers from the US and EU are tempted to shift orders from
China, Bangladesh and Vietnam to India thanks to the increased
competitiveness of Indian exporters thanks to a weaker local currency
 Robust demand
• Increased penetration of organised retail, favourable demographics and
rising income level to drive textile demand
• Growth in building and construction will continue to drive demand for
non-clothing textiles
 Competitive Advantage
• Abundant availability of raw materials such as cotton, wool, silk and
jute and skilled workforce has made India a sourcing hub
Advantage India

5.

 Increasing investments
• Over USD35 billion of investments have been made in the textile &
clothing sector during the last four years, with the cotton textile
segment accounting for around 75 per cent
 Policy support
• 100 per cent FDI through the automatic route is allowed in the
Indian textile sector SITP was approved in July 2005 to facilitate
setting up of textiles parks with world class infrastructure facilities
 Market Value: USD220 billion
Advantage India

6.

Notable trends in the Indian textile sector
• The Ministry of Textiles is encouraging
investments through increasing focus on
schemes such as TUFS & TMC and cluster
development activities
Increasing investment in
TUFS & TMC
• The Ministry of Textiles commenced an
initiative to establish institutes under the
public-private partnership (PPP) model to
encourage private sector participation in the
development of the industry
Public-Private
Partnership (PPP)
Technical textiles
• Technical textiles, growing at around twice the
rate of textiles for clothing applications, now
account for more than half of total textile
production

10.

Opportunities
Immense growth
potential
Private sector
participation in silk
production
Technical textiles
The Indian textile
industry is set for strong
growth, buoyed by both
strong domestic
consumption as well as
export demand
The Central Silk Board has
set a target of 28,000 tonnes
of raw silk production by
2012–13
Technical textile market
estimated at USD12 billion in
2012
For the near term
(2012), the sector is
valued at USD110 billion
by the Confederation of
Indian Textile Industry
(CITI)
To achieve these
targets, alliances with the
private sector, especially
major agro-based industries
in pre-cocoon and post-
cocoon segments, is being
encouraged
India’s technical textile
industry is mainly
dominated by unorganised
players. However, it is an
emerging area for
investment with good
growth potential
Estimates put the sector
market value at USD 220
Billion by 2020
The market is likely to grow
to USD31 billion by
2020, implying a CAGR of 10
per cent

11.

Opportunities
Retail sector offers
growth potential
Centres of Excellence
(CoE) for research and
technical training
Foreign investments
With consumerism and
disposable income on the
rise, the retail sector has
experienced a rapid
growth in the past
decade with several
international players like
Marks & Spencer, Guess
and Next having entered
Indian market
The CoEs are aimed at
creating testing and
evaluation facilities as well as
developing resource centres
and training facilities.
Further fund support would
be provided for appointing
experts to develop these
facilities
The government is taking
initiatives to attract foreign
investments in the textile
sector through
promotional visits to
countries such as Japan,
Germany, Italy and France
The organised apparel
segment is expected to
grow at a compound
annual growth rate
(CAGR) of more than 13
per cent over a 10-year
period
Existing four CoEs, BTRA for
Geotech, SITRA for Meditech,
NITRA for Protech and
SASMIRA for Agrotech,
would be upgraded in terms
of development of incubation
centre and support for
development of prototypes

13.

Budget proposals Impact on the industry
Hike in standard
excise duty from
1%, 5% and 10% to
2%, 6% and 12%
on various items
• The hike in excise duty on cotton-based products from 5%
to 6% is not expected to have any significant negative
impact on cotton textile players since the excise duty on
cotton-based products is concessional and optional.
• The hike in excise duty on textile products other than
cotton-based products from 10% to 12% is expected to
increase the cost of production for non-cotton textile
players.
Hike in excise duty
on branded
readymade
garments from
10% (with 55%
abetment) to
12% (with 70%
abetment)
• The hike in excise duty on branded readymade garment
from 10% to 12% coupled with an increase in abetment
from 55% to 70% would result in a net decline in effective
excise duty from 4.5% to 3.6% which is expected to result
in marginal benefit to readymade garment manufacturers.
• With falling cotton prices and proposed reduction in
effective excise duty, the prices of cotton-based branded
readymade garments is expected to come down which
would lead to boost in demand.
Union Budget - Proposal and Impact

14.

Budget proposals Impact on the industry
Exemption of
customs duty for
new automated
shuttle looms
The exemption of new automated shuttle looms from customs
duty is expected to boost investments and capacity addition
in weaving and garment sectors which may increase
competition considering the fragmented nature of the
industry.
Union Budget - Proposal and Impact
Note
In Union Budged 2012-13, the government has announced a financial package of
Rs. 3,884 crore for waiver of loans of handloom weavers and their cooperative
societies.

15.

Domestic Growth Drivers
 Increasing retail penetration
 Textiles and clothing retail comprise of 40% of India’s organized retailing
 Share of organized retailing to increase from about 5% currently to about
24% by FY 2020
 Higher disposable income
 Consistent increase in per capita income of the masses
 Consumption of textiles expected to increase to about 11% CAGR
 Higher percentage of working women
 Propensity to spend in working women higher by around 1.3 times
compared to a housewife
 Population of working women increased to about 32% from 26% in 2001
 Increase in nuclear families
 Avg household size decreased to about 5.0 from 5.36 in 2001
 As a result, per household consumption is increasing
 Favorable demographic profile
 Rise in percentage of earning population (15 – 60 years) to about 60%

18.

 After three months of sharp downturn, registration for yarn
exports shot up by 17.8 per cent in May on renewed demand from
the traditional markets, including North America and Western
Europe
 Fresh demand from other markets, such as Latin America
, Russia, Japan and Africa.
 US non-apparel sector (yarns and fabrics) recorded a staggering
19.5 per cent growth in Jan-April 2012.
 Carpets shipments grew at an average rate of over 10 %
 Government has revised upwards the textiles export target to $40.5
billion for 2012-13.
 Zero per cent duty Export Promotion Capital Goods (EPCG)
Scheme for technology upgradation extended till 31 March, 2013
 Market-linked focus product scheme was also extended till the end
of the current fiscal for exports to the US and the European Union
in respect of the apparel sector
Future Trends